Facebook Inc. (NASDAQ:FB) has been working to improve its revenue streams. One of the ways it has been working on developing has been "Sponsored Stories," where certain advertisers pay for specialized posts that would appear in users' News Feeds - the more the advertisers pay, the more users that would see the post However, something in the program caused more than 100 million users to have their "likes" posted as part of the "Sponsored Stories," and Facebook Inc. (FB) has been looking to put aside a lawsuit.
There was a class action lawsuit filed against Facebook Inc. (NASDAQ:FB) over its "Sponsored Stories" program, as the class claimed in its 2011 lawsuit that the Web site violated California state law by making users' "likes" of "Sponsored Stories" advertisers public without paying the users or give them a way to opt-out of the program. In a new settlement offer, Facebook Inc. (FB) is offering $20 million to cover legal fees and give users in the class about $10 each.
Facebook Inc. (NASDAQ:FB) is making this new offer after an original $10 million offer was rejected by U.S. District Judge Richard Seeborg, mainly because none of the money was earmarked for the class - instead was to be set aside to charities that work with Internet privacy issues.
"We believe the revised settlement is fair, reasonable, and adequate and responds to the issues raised previously by the court," said Facebook spokesman Andrew Noyes. As part of the settlement, Facebook Inc. (NASDAQ:FB) would offer to give users more control over how their preferences and identities are used in similar programs and services.
With all of the market cap that Facebook Inc. (NASDAQ:FB) currently owns, a $20 million settlement should barely make a ripple on the bottom line, though it is a bit of a public-relations issue for "Sponsored Stories," which was designed to be a source of revenue. Investors like billionaire fund manager Jeffrey Vinik of Vinik Asset Management will likely watch to see if this $20 million ends up ending the revenue stream or just modifies the plan.